Tim Walz considers shift away from school referendums to fund Minnesota schools

Gov. Tim Walz is aiming to overhaul the way Minnesota funds its schools, putting more responsibility on the state and making local referendums "either rare or extinct."

As he finalizes his first budget, the DFL governor said he's focused on reversing what he sees as a disturbing trend: a leveling off in state support for education that's putting more pressure on local funding and widening gaps between wealthy and poor and between metro and outstate schools. Walz declined to release the specifics of his plan. But he said his budget — due by Feb. 19 — will include several proposals that would "start to set the groundwork" for a shift away from the bonding and operating referendums that currently add up to more than $1.6 billion in school funding each year.

"When people are asked to tax themselves for education, they overwhelmingly say yes in Minnesota," he said in an interview last week. "The problem is that it's not the best or most efficient way to do it, and I'm not sure we get the most bang for our buck. It creates haves and have nots."

Walz's interest in the idea is already drawing support from some school administrators and education groups, particularly those representing rural communities and school districts that lack a broad property tax base. But it's also prompting caution from others who say shaking up Minnesota's education finance system would further burden taxpayers, erode local control and potentially leave some districts worse off.

"Just about every education association or group would agree that, in an ideal world, the state would provide 100 percent of the funding and school districts would not have to rely on operating referendums," said Scott Croonquist, executive director of the Association of Metropolitan School Districts. "But the reality is: We are light years away from that."

The state now provides about two-thirds of the revenue used to fund Minnesota's public schools, while local districts, through voter-approved operating and bonding referendums, pick up about 27 percent. The remaining 6 percent comes from the federal government.

Those shares have remained relatively steady in recent years. But state support has dropped since the early 2000s, when then-Gov. Jesse Ventura's "Big Plan" brought the state's contribution up to 75 percent.

Since then, as the state's share of school revenue declined and then leveled off, districts have grappled with rising costs — particularly for special education, which is mandated by the federal government. When state funding hasn't matched those ups and downs, more districts have looked to referendums as a way to stave off big cuts.

Fred Nolan, executive director of the Minnesota Rural Education Association, said that while some districts have been able to turn to voters again and again and weather the storm, others are struggling. In the November 2018 election, every metro school district that sought to increase its operating levy was successful. Among greater Minnesota districts, the passage rate was just 42 percent.

"In a sense, the state has fallen back on the property tax," said Nolan, "but it's an uneven, lumpy mattress. And that's causing a lot of issues."

Walz said he wants to reclaim the successes the state found under another of his predecessors: Gov. Wendell Anderson, who in 1971 signed into law a tax bill that dramatically transformed school funding, putting more responsibility on the state and reducing property taxes. Anderson's efforts won national attention, and the bill became known as the "Minnesota Miracle."

Any new "miracle," Walz said, would have to begin with a boost to the amount of money the state provides all schools through its basic, per-pupil funding formula. He said it must keep up with or exceed inflation. He wants to direct more money to cover special education, paying particular attention to districts with the highest costs, expand early education programs and provide more help for districts with a predominantly agricultural tax base.

Then, he said, the state might begin to unwind its dependence on local referendums.

"We're looking at this as multiple bienniums to try to get at it," he said. "But we're sending a strong message on the front end that closing [the funding gap] matters."

It is not clear, however, how the governor will address those goals in his forthcoming budget. Also uncertain: how his plans may be affected by an upcoming financial forecast that's expected to paint a gloomier picture than the $1.5 billion surplus the state was predicting late last year. The governor declined to say if he expects to find additional education money exclusively by trimming elsewhere, or if he'll seek new revenue sources.

"What I can say is that the budget will be structurally sound," Walz said.

Sen. Carla Nelson, R-Rochester, chairwoman of the Senate Education Finance and Policy Committee, said any plan that would raise other taxes to do away with local referendums would result in a "net zero" for voters — and threaten communities' local control over their schools. She noted that Minnesota is more generous than a majority of states when it comes to how much it pitches in for schools.

"It's rather arcane for us to debate which governing body is applying a tax or not, whether it's the local or the state or the feds, but in reality there's one taxpayer pocket," she said.

In the meantime, school administrators around the state are making calculations of their own.

In the Glenville-Emmons school district, southeast of Albert Lea, Superintendent Jerry Reshetar is figuring out how to replace one of his 300-student district's aging school buses. He hoped to fund it with money from an operating referendum increase last fall, but voters turned it down. Now he's contemplating an even bigger fear: that voters won't approve a renewal of the district's current operating levy next fall.

That, he said, would be a vote to close both the district's schools.

Reshetar said he's curious about Walz's ideas, but also realistic. He's not sure the state will be able to increase its share of the cost — and notes that taxpayers would still be responsible, even if it did.

"When you get into a tight economy with local farmers who have issues with the current price of corn or beans, they may say: 'Jerry, I can't afford that,' " he said. "So that makes it difficult."

Buffalo-Hanover-Montrose Superintendent Scott Thielman said exurban districts like his have a close-up view of the disparities between property-rich districts and those with a smaller tax base. His district, west of the Twin Cities, hasn't been able to pass an operating levy increase since 2002.

Thielman said he's hopeful Walz and lawmakers will at least find room to help districts with special education funding, mental health services and smaller class sizes — all things he's struggling to find room for in his budget, particularly without a boost in local support.

In the Floodwood school district, about 45 miles west of Duluth, declining enrollment means less per-pupil aid from the state. Superintendent Rae Villebrun said that's a big problem for her district, which also failed to pass an operating referendum increase last fall. With just 199 students, the district may have to begin combining grade levels if it can't get more help from local voters, Villebrun said.

She's intrigued by the idea of more money from the state but wonders about the logistics. Who gets to decide what her district really needs? Who makes the call to combine the first and second grade into a single classroom?

"In an ideal world, that would be fabulous," she said. "I don't know how it would work."

Erin Golden • 612-673-4790